The government, and those who parrot the government line, would have Americans believe that the fault for the current economic downturn lies with capitalism.
According to the omnipotent servants of the state, it is corporate greed that has brought the stock market crashing down.
This is entirely false.
Consider the fact that Hillary Clinton has publicly blamed George Bush for ending the "good time" (the financial one) of her libidinous hubby’s reign.
As reported in the New York Daily News (the paper for Yankees coverage), the cattle-trading senator from New York, by way of Arkansas and Illinois, said:
"If all of the arrows that were pointing up are now pointing down, and those that were headed down are going back up, blame cannot and should not be placed at the feet of those who led our nation during one of the greatest periods of prosperity and progress in our nation."
First, as the Daily News observes, the recession and stock market slide began during the Clinton administration.
Second — and more importantly — the blame for the bust must be placed with Clinton, Bush, and the Federal Reserve, i.e., Alan Greenspan.
Under Clinton, and under Bush the First, the federal government inflated the money supply. Bush the Second has continued to inflate the money supply. In short, Slick Willie and the Bushes have been counterfeiting. The government, while not creating any new material wealth, has printed lots and lots more money.
The result? Cheap credit, easy loans. Much of the money from the newly-created credit went into the booming stock market — and inflated stock valuations to record heights.
Unsurprisingly, reality eventually set in. Dot.com companies that traded at sky-high price-to-earnings ratios came crashing down.
Investments that once looked like "sure things" are now seen for the malinvestments that they are. And these malinvestments must be liquidated.
Is this economics lesson something that I, a non-economist, have invented? Absolutely not.
Instead, credit the Austrian School of Economics for the Austrian theory of the business cycle. More particularly, credit the thinkers Ludwig von Mises, Murray Rothbard, and Friedrich Hayek.
In short, the Austrian theory of the business cycle has been around for a very long time. It has also been ignored by the power elites for a very long time. Unsurprisingly, the power elites have demonstrated a strong preference for the theories of John Maynard Keynes. It is Keynes, after all, who holds that the state may spend a nation out of a recession.
Broke? You’re not spending enough! Only a politician could fall for this stuff.
Additionally, if Lord Keynes is correct to prescribe more spending to escape a recession, what is wrong with counterfeiting? For Keynes, men may arguably have a moral duty to counterfeit during a recession.
The more damage that is done to the economy, the more the unthinking masses cry out to give the power elites exactly what the elites desire above all else — more power.
Thinking men ought not to be duped by the contemporary attack on that facet of free society known as the free market. There is indeed blame to be handed out for the worsening of the economy.
Blame the men who inflated the money supply. Blame the politicians. It is, after all, their fault. They have manipulated money and credit in exchange for political advantage. For men like Bush and Clinton, they enjoyed some advantage. Those who do not understand economics wrongly believed that these politicians had brought genuine prosperity.
The "prosperity" was a sham. Hillary Clinton should not take credit for her husband’s alleged accomplishments. Instead, she should apologize for her husband’s selfish pursuit of cheap credit and phony prosperity for short-term political gain.
Bring back the gold standard. Abolish the legal tender laws. That would be a start.
- William L. Anderson, "The U.S. Economy is Not Depression Proof"
- George Reisman, "The Stock Market, Profits, and Credit Expansion"
- The Austrian Theory of the Trade Cycle
Mr. Dieteman [send him mail] is an attorney in Erie, Pennsylvania, and a PhD candidate in philosophy at The Catholic University of America.
© 2002 David Dieteman